With the reporting season over for this period, I decided to take a look at the dividend trend of the companies that I hold in my portfolio. I am breaking this write up into two to three parts. The first part is on companies that I categorised as income counters. The second will be on growth counters that also give out dividend. I am still considering if I want to do a post on Reit.

As seen from the two images above, I have eight income counters. All of them have increased their dividend since 2017. The increase is not linear and on a year to year basis, declared dividend might stagnate or even decrease as it depends on how the company performed for the year and the following year’s outlook.

Two numbers stand out. The first figure is the latest payout ratio for Micro-Mechanics, which is more than their earning. The group can do that as their operating cashflow is higher than their earning. FY2023 might see a drop in dividend though as the group reported a challenging environment in the first half. They have maintained their interim dividend of 6 cents and I think they will maintain their final dividend of 6 cents too. However, it is possible that they might drop the 2 cents special dividend if the macro conditions do not improve.

The second figure is the growth rate for The Hour Glass. 32% annual growth rate is definitely impressive but is this sustainable going forward? Not the growth rate. They have benefitted from new interest in the specialty luxury watch sector since pandemic but with the current macro conditions, it is hard to see the same momentum.

While the growth might not be able to sustain, it is my opinion that they should be able to sustain the final dividend of 6 cents. They have maintained their interim dividend of 2 cents with EPS growing by 41%. So even if second half see a drop in revenue and profit, FY2023 performance should be at least on par with previous year.

Why take the risk when T-bill and Fixed Deposit is yielding at 4%?

There is nothing wrong with investing in T-bill and fixed deposit. In fact, regular readers would have noted that I have taken advantage of the higher rate over the past year to park my cash. However, these are short term instruments and while rate is likely to stay high for this year and probably next, it is anyone’s guess what it will be three to five years later.

The above image shows the cost yield based on my average purchase price. As seen, my cost yield for all the counters are higher than the current yield. Of course this is not guaranteed and going forward some of the numbers might reverse. However, I reckon that as long as I invest in good businesses with strong leaders at reasonable price, my chance of getting better return improves with time.

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